The Myth That Software Startups Need Or Want Patents

from the the-system-is-broken dept

While I’m not as much in agreement with the crew of folks who likes to separate out “software patents” from the rest of the patent system (the whole system is broken), I can see serious problems with the way that “software” is patented these days. I tend to think that the fix isn’t to carve out software patents, but to fix the whole system itself. Still, if we look at what are generally considered software patents, it does seem clear that they are doing tremendous damage to the industry and innovation as a whole — and thus are very much in violation of the Constitution’s patent clause which only allows for a patent system if it “promotes the progress.” Tim Lee points us to James Besson’s most recent paper, in which he analyzes a generation’s worth of software patents and shows how little most in the software industry actually seem to want patents. In fact, it’s mostly those outside of the industry who obtain software patents.

The report notes, first of all, that historically most software companies don’t actually get patents. Referring to his own earlier research, he notes that, in the 1990s, only 7% of software patents came from software companies, despite the fact that those firms employed 33% of developers. Instead, most software patents were obtained by others. When it comes to startups, even fewer obtain patents. That was in the ’90s, but more recent research backs this up as well. In 2008, only 24% of software companies surveyed held patents, and when asked why, the key reason given was that “patents did not provide important incentives” to startups. That’s all old data, however. The focus of this new paper is on Bessen’s latest findings.

There, he finds that the number of software patents being issued has been growing “dramatically;” much faster than the growth in patents in general. As for the question of software firms obtaining patents? Well, it does show more software companies are getting software patents, but it’s still a minority of such firms. And it’s absolutely true of “startups.” In fact, the study found that a smaller and smaller percentage of startup firms seem to be getting patents these days. If patents really were so “necessary” for startups, as some claim, you wouldn’t see that. Once again, it appears that software patents aren’t actually coming from the real innovators in software:

The large number of software patent grants and the small share of software firms obtaining patents imply that software firms account for relatively little of the activity in software patenting. This intuition is verified in Table 2 which shows that the broad software industry (SIC 737) accounted for only 11 percent of software patent grants to public firms in 1996 and 17 percent in 2006. The prepackaged software industry account for 2.8 percent and 9.8 percent in those years respectively. Thus the software industry still accounts for a small portion of software patent grants, although that portion has increased over the last decade. Most software patents still go to non-software firms.

Moreover, the increase in the share of software patents granted to software firms is largely accounted for by the activity of a small number of large software firms. Table 3 lists the patents granted to the top 10 recipients in the prepackaged software industry for each year. These firms increased their patenting by an order of magnitude and this accounts for most of the increase in patents going to the software industry as shown in Table 2. These few large firms account for most of the software patents granted to the software industry (75 percent and 81 percent in 1996 and 2006 respectively).

To summarize, most software firms still do not patent, although the percentage has increased. And most software patents go to firms outside the software industry, despite the industry?s substantial role in software innovation. While the share of patents going to the software industry has increased, that increase is largely the result of patenting by a few large firms.

But for all those software firms doing the actual innovating… they’re still running into a lot more lawsuits:

the number of lawsuits involving software patents has more than tripled since 1999. This represents a substantial increase in litigation risk and hence a disincentive to invest in innovation.

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Comments on “The Myth That Software Startups Need Or Want Patents”

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Jose_X (profile) says:

Re: s/w patents

If costs and scarcity weren’t issues, then all patent classes would likely be similar, but information patents (which is all that software is.. the information/instructions the define the behavior of a general purpose computing device), aka process patents, have a very different cost/scarcity structure and make for much worse patents than traditional machine patents. The monopolies (or “taxes” or any restrictions) come with a much higher opportunity cost: many more contributors/participants are hand-cuffed/taxed. There are very large costs to blocking information creations for 20 years. We certainly don’t see academics not use their colleagues’ discoveries until 20 years pass. That would be stifling indeed.

Since every rule brings with it some positive and some negative, it should be clear that just knowing software patents are likely to come with much larger negatives (opportunity costs), that the pressure is on to try and prove that somehow progress could be promoted despite that heavy negative. Conversely, the bar to show another patent type would promote the progress is likely to be much lower (if perhaps still too high to achieve in any given case).

darryl says:

Tell that to Google !!!!! what a JOKE !!!

The report notes, first of all, that historically most software companies don’t actually get patents.

Mike you might want to have a little chat with Google !!!

Or oracle, or IBM, or Microsoft, or novell, or we’ll EVERYONE one.

This is SO FUNNY just after reading here how a “software company” just paid $12.5 Billion Dollars for patents, and you now say, ‘software companies don’t actually get patents…

What a joke…

We’ll it would be a joke if it was not so sad… (for Mike).
(This is called, saying things because you would like them to be true, it has nothing to actually do with reality.)

It is so easy to tell why you Mike are not in the tech industry, and why you are on some backwater (jerkwater) web site spewing total rubbish.

At least it is a clear indication of how you saying things regardless of facts or reality.

You ofcourse believe that if you say it enough times, someone might end up believing you.. Most just see you for what you are !!!!

Chronno S. Trigger (profile) says:

Re: Tell that to Google !!!!! what a JOKE !!!

Darryl, pay attention. First off, they said MOST software companies. Secondly, they added that the vast majority of patents are going to a select few large companies. AKA: Oracle, IBM, Microsoft, Google. But there are thousands of companies out there that just don’t feel the need.

How can you keep saying that Mike doesn’t pay attention to reality when you so blatantly ignore what’s being said. You have no idea what Mike said, so it’s impossible for you to have any idea if he’s paying attention to reality or not.

Tor (profile) says:

Re: Tell that to Google !!!!! what a JOKE !!!

What we’re currently seeing is a repeat of the cold war being played out in the field of software. Your argument seems to be that the fact that a super power heavily invests in arms means that guns and military resources are inherently good and useful to society and promotes progress. To me that’s extremely narrow-minded. Instead of ending the arms race you suggest that we actively engage in it.

That makes me think of the discussion about Frederic Bastiat and the broken window analogy. Of course an arms race can seem productive if you selectively look at the production of guns. But if you consider what alternative things that same money bought it suddenly doesn’t seem as wise an investment any more.

And if we continue with the cold war analogy, it’s difficult to see how small peaceful nations would benefit from the development of aggressive and expansionistic super powers. If all countries have to increase their defense budgets it’s difficult to see how that could possibly promote progress.

Political leaders of today generally understand that peaceful coexistence and mutual trade is better than engaging in military aggression and ever increasing threats. Now if this insight could only be applied to software patents too…

out_of_the_blue says:

Oh, they WANT them, it just isn't cheap enough.

If you could mail it in with a check for $25, there’d be an explosion of patents. At one time, the patent office was supposed to make vaguely sure that a patent didn’t conflict with others. That ended when Reagan turned it into just another profit center. So it’s you libertarians with your “run gov’t like a business” notions that have brought on the patent mess. Even though you know that unintended consequences will be greater than the intended ones.

Josh in CharlotteNC (profile) says:

Re: Oh, they WANT them, it just isn't cheap enough.

In general, libertarians don’t want “government run like a business” – they want as little government as possible.

Please don’t confuse the current Tea Party neo-conservative political movement with all libertarians just because they happen to agree with a few libertarian ideals.

Jose_X (profile) says:

Re: Oh, they WANT them, it just isn't cheap enough.

>> If you could mail it in with a check for $25, there’d be an explosion of patents.

And then we’d see that many many people have ideas that overlap those of others, many of which would meet the very low “non-obvious to a [PHOSITA]” bar.

If the system can’t be fair to the majority and at the same time succeed, then it needs serious reform.

Capitalist Lion Tamer (profile) says:

Re: Oh, they WANT them, it just isn't cheap enough.

If you could mail it in with a check for $25, there’d be an explosion of patents.”

I’m really not sure if we could handle an explosion bigger than the one we’ve got.

“It took nearly 80 years for the first 1 million patents to issue in the U.S. On Tuesday, the U.S. Patent and Trademark Office issued its eighth-million patent. This most recent 1 million patents took only about 5 years.”

Anonymous Coward says:

Perfectly Simple Fix

The patent system could be fixed overnight by doing one simple thing – take out the government-granted monopoly privilege. Repeal the part of the law which makes patent infringement illegal. The whole idea of infringement is foolish. Patents should be available to be used by anybody, not locked up in the hands of one entity, who can then run an extortion racket against everybody else. A patent should be an advertisement by an inventor that they are available for consulting work, and to prove how good they are, here is a brilliant invention. A patent is a way for an inventor to claim the credit for making an invention. Plenty of people will work hard for consulting fees and credit. More of them will be making inventions as a natural consequence of solving problems – necessity in other words. The problem of “how do I make a profitable product” is a huge spur to invention. The government does not need to offer anybody a monopoly in return for invention. Other motivations are more than sufficient. Invention will go on just fine in the absence of monopolies.

Monopolies are bad for the economy. So, will the pollies get rid of them? Alas, with the amount of money which is now tied up in patents, almost any amount of political corruption can be paid for. You Americans are going to need to get a lot more worked up about the damage patents are doing to your economy, before Congress will go anywhere near fixing the problem. Congress critters need to feel that they are facing full-scale hatred from the electorate unless they get rid of the monopolies. Good luck.

Tor (profile) says:

Carving out software patents

I tend to think that the fix isn’t to carve out software patents, but to fix the whole system itself.

I think that carving out software patents would be different than carving out things like governmental or military use of inventions (which makes it easier for politicians to ignore the problems). It would mean that politicians would be exposed to a field of innovation that flourishes despite/thanks to the lack of patents. It’s easier to start where the problems are most severe.

Maybe you could compare this to how many copyright maximalists are strongly opposed to of all kinds of exceptions (even for people with disabilities) – not because they necessarily leads to less profit but because it makes it harder for them to politically argue that some principles of theirs are absolute, i.e. because it shifts the view from personal rights to societal progress.

“and shows how such little most in the software industry”

Mike, I think there’s an error in that sentence.

Anonymous Coward says:

Poker game

Software patents are like poker chips in a game of hold’em.
The chip leader can run the show and make the guys(companies) holding fewer chips fold early or risk going out(of business).
Companies are now buying other companies to try to balance the number of chips held, so no one has an advantage.
The game is over when one person(company) ends up holding all of the chips(patents). In the business world, one company holding all the chips would be called a monopoly. The sad thing is that the gov’t is creating this monopoly.

darryl says:

Re: Re:

probably because the number of software patents have tripled as well, and the number of people playing wait and steal has also trippled.

Probably because the number of innovations have tripled as well.

Gee industries who are successful grow !!!!! who would of thought that !!!

I am also sure the amount of money spent on research and development has also more than tripled over that time period.

that is if you consider legally defending your right to own knowledge, or the right to buy knowledge off someone else to be a bad thing.

You could just as easily make that argument in support of the patent system, showing just how well the system works.

but this deal seals the patent on software systems into concrete,

and as for “most companies” WHO CARES, we are talking about number of patents, not number of companies, and the few companies I mentioned hold the lions share of patents.

The rest are simply backgroud noise, the ones that really matter, the ones that are successful, that ones that provide the products and services people WANT, are quite happy with patents just the way they are.

which means so is everyone else.. except if you drink Masnick coolaid.

I wonder if any of you have ever applied for and received a patent ? or have any understanding of the extensive process it requires ?

If you had of done that, you would fully understand the use and nature of patents, and I am sure would reframe from making silly comments. Because quite simply, these types of comments clearly shows a major lack of basic understanding on how industry works, and how it is necessary to know how to do something, before you can actually do it.

If you think Google is going to pay out 12.5 billion dollars just to sit on their hands or use it for some cold war, (a cold war is when you have weapons but do not use them).

That will not occur, Google purchased the company for its knowledge and expertise, that is its IP.

google in the past has tried and failed to introduce technologies using different methods, now they are simply paying someone else who has displayed that they have the required IP to make a successful product.

Googles bit problem now is that they have just made all their partners their enemies !!

Oh well, time will tell, but Mike wont… if it does not go the way Mike thinks (dreams) it will go, he will just remain either silent on the issue, or find some obscure article someone else wrote to ‘back up’ his ‘story’.

But like it or not this is a massive blow to Mike, and his ilk, because it is saying to the world, clearly that patents are GREAT, especially in software….

Try as he might, being able to spin this against patents will be most amusing to watch.

At least we can thank Mike for that.. thankyou…

And thanks for running all those Google adds as well, allowing all of your readers to invest in Googles purchase of patents.

Are you now going to Boycott Google ?, or is the money just too much incentive for your to remain on the dark side ?

It’s like watching a train wreck in slow motion, you know what is going to happen you know it is not going to be pleasant, and you know Mike is driving the train, and is asleep at the throttle !!!

No matter how you try to spin it, this is a massive vindication of the importance and value placed upon Patents and IP.

Say what you want, talk is cheap, patents and IP is not.

what you do not seem to realise, that the patents in question could be all given to someone like Mike, and mike would have 2 major problems.

1) he would not understand what the patents were about.
2) he would not be able to implement the patents.

Both task are technically beyond most people, or any one person. It is only the very large corporations that have the technical expertise to make use of those patents.

(and to determine,if anyone else is achieving the same result, by applying the same method.)

That is why google did not just purchase the patents, because they do not have the depth of expertise to make effective use of those patents.

MMI does.

just providing that information to the public domain would not result in hundreds of small startups taking one or two of them and building a product,

But collectively, in the hands of an organization that is capable of applying those concepts will (or should) be able to apply that technology.

I very much doubt Google has that capability, and that is why they purchased MMI. Because MMI has been successful in several areas of technology that Google has tried and failed in.

Googgle is still JUST an advertising company, they are ‘wannabees’ in the tech industry, but they are not at present considered ‘players’.

I am of the opinion that this will fail as well (for google, not MMI).

And will be another black hole to pour money into (Mikes Money).

Time will tell, and history has told us Googles clear failings, this will not be anything different, or it may even be a sign of desperation!

It IS desperation, you do not pay $12.5 Bill if you are not DESPERATE for something 🙂

Lord Binky says:

Just throw it out already.

This is ridiculous. Companies are buying other companies for their patent portfolio, then they can lay off the newly aquired staff. That’s really helping the economy…..

The idea that you need patents to show your serious is stupid as well. So the more patents, which are just chunks of at least $5k cash to buy each one (they’re not original or unique or even creative, just reword any common feature of anything), the more investors take note? NO SHIT, the more money someone else has invested makes investors more interested. The only reason a patent is of interest is whether to sue or prevent being sued. Investors are more scared of putting their money into companies because they are afraid that even if it would have worked, someone could ruin the company with a vague or general patent.

Yes, it is WRONG to be able to OWN knowledge. I’m all for the exchange of knowledge, and useful knowledge would definitely be worth more to someone and therefore cost more. Let’s be clear though, buying knowledge is a shortcut to putting the effort in to develop that knowledge. There’s nothing wrong with selling knowledge to someone, but saying you own it and anyone that comes up with it on their own can’t use it, that’s just bullshit.

Locking up knowledge and preventing even someone coming to that same knowledge independently on their own from using THEIR hard work at aquiring knowledge IS WRONG and is NOT A RIGHT. You have a secret? Good, don’t tell anyone. If someone finds out the same thing on their own on the other side of the world unconnected to you by any way, too bad your shit out of luck.

There are patents for TIME TRAVEL you can’t say the system is a joke. The function of the patent system is actively harming the economy, research, and innovation far more than whatever even the potential claims of the benefits it grants.

It is a stupid parasitic dream that you can come up with some eureaka moment in the tub jot it down on paper, and sit on your ass for the rest of your life living off that one good idea.

staff (profile) says:

patent bill is bad for America

One shill referencing another? All you two know about patents is you don’t have any.

The Constitution says ?To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries?. Therefore, if an invention is useful and promotes science, it should be patentable. It?s that simple.

Large companies frequently try to steal a small company?s invention, once the small company has risked its future on the invention and proven the invention works. Now large multinational (non-American) companies are effectively trying to steal rights to inventions by lobbying Congress to engage in a misguided ?reform? of the patent laws. If they succeed in this theft they will also, sadly, have stolen our jobs, our ability to make the future and our uniquely successful American culture of innovation and invention.

step back says:

Logic 4 logical software minds= bad idea


The closed cubicle minds who read this malware blog do not listen to logic and reason.

If they did, they wouldn’t be here in the first place.
So you’re wasting your time with the Appeal-to-Logic/Reason rhetoric.

Ask them not to use their intellect, logic and mythical reasoning skills.
Ask them not to actually read HR 1249 (the “Deform of US Innovation” bill).

Ask them instead why they don’t all work 100% of their time for free rather than insisting on getting minimum hourly wage from their benevolent overlords for the “obviously” worthless software re-creation work they do (“re-creation” because none of them ever come up with something new, novel and useful).

@Coward: that was a funny one about “next week”
How about: Next week, The Myth that the Blogosphere Isn’t Broken and Why it needs to be Abolished

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